E*Trade (ETFC) Looks To Citadel To Shore Up Its Financial Position
E*Trade Financial (Nasdaq: ETFC) is working on a deal to shore up its financial position with its largest shareholder, hedge fund Citadel Investment Group.
Yesterday, it was announced that Citadel founder Kenneth Griffin has joined the Board of Directors of of E*Trade and will serve as a member of the Company's Finance and Risk Oversight Committee. With the appointment of Mr. Griffin, 40, Citadel Investment Group has exercised its right under the 2007 Citadel Investment Agreement to appoint a member to E*Trade's Board of Directors.
E*Trade, which is best known for its online brokerage operations, has been hard hit from its banking operation due to the mortgage crisis.
Citadel injected $1.75 billion into E*Trade in late 2007 and is its largest shareholder with a 15.6% stake. Citadel is also E*Trade's largest bondholder. Citadel's investments in E*Trade have plummeted in value and at times tensions have flared between E*Trade and Citadel executives.
E*Trade's bank regulators want the company to raise more capital in the near term, but one option of exchanging bonds for equity is complicated by the fact that Citadel must keep its stock ownership below 24.9% to avoid being regulated like a bank.
Link to WSJ Article
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